Ghana Has More Power, So Why So Much “Dumsor”?

The pervasive darkness in the homes of residents of Accra, Ghana’s business hub, is out of sync with data from the country’s Energy Commission.EC’s statistics show that Ghana doubled its electricity generating capacity between 2000 and 2013. A new 400 megawatt (MW) hydropower plant was commissioned in December 2013, as was a 125MW thermal power barge. A 132MW thermal generation plant came on stream in a year earlier. Total electricity generated increased by 52% from 2006 to 2013; total electricity consumed grew by 43.7% in the same period and yet, at an increase of 21.5%, population growth has trailed behind the generation and consumption of electricity (See charts).

Still an epidemic of “Dumsor” (a Twi word for off and on, now a popular slang for load shedding), has gripped the second largest economy in West Africa.

The current crisis dates back to 2009, a year before the commissioning of the Jubilee field, Ghana’s first significant oil producing field. The ingratiation of the upstream (Exploration and Production) sector of oil industry, delivering all of 100,000Barrels of Oil Per Day, into the Ghanaian economy, altered the dynamics of economic activity; while E&P could be an enclave sector in a pre-industrialised society, it often throws up huge consumer and logistical demand that puts pressure on energy supplies. An upsurge in demand for energy for a growing upmarket population is one of the several accompaniments of the arrival of this segment of the oil industry.

With transmission losses of 5% of the net (peak) generation of 1,943MW, the lunchtime conversation in Accra focuses on the searing summer heat and the power shortage.

A new investment opportunity is the diesel generator business. A growing series of sleek TV commercials highlight one generator brand after another. And banks now publish full page ads in national newspapers offering generator loans.

“Under the current load-shedding regime wherein power is restored for 12 hours after every 24 hour outage”, reports the Business and Financial Times bftonline.com, “businesses like petroleum products retail outlets face more than 20 days without power in a month”. Such companies “have spent in excess of $25Million (GH¢100Million)” between January1 and April 30, 2015, on generators.

Keen to get a grip on the crisis, President John Mahama created a ministry specifically for electrical power and appointed Kwabena Donkor, former Deputy Minister of Energy, to head it. Mr Donkor has said he is prepared to get rid of his own diesel powered generator if the country continues to wallow in darkness. Some of his earliest assignments have been to follow up on the ongoing construction of new power plants as well as rehabilitation of ailing plants that have been fingered for the crisis of the last three years.

Ghana generates more power from hydropower plants than from thermal stations, but the longer term plan is for more thermal plants fuelled by Natural gas.

The government targets 5,000 megawatts (MW) of electricity, which means double the current capacity, by 2017. The country has ordered the importation of two thermal generating barges, with total capacity of 450MW, from Turkey. Both are expected to have been delivered by end of 2015. Ongoing gas-fired power plant projects include a 360MW capacity plant that is additional to the current 200MW capacity at the Chinese owned Sunon Asogli plant, 230MW thermal plant at Kpone, near the Port town of Tema and a new plant being built by TAQA, Abu Dhabi’s National Energy Company, to increase an existing plant by 110MW, all grossing 1,110MW on top of the exiting 1,245MW. When these are completed between 2015 and 2016 they will collectively require total gas volume of at least 300 million standard cubic feet of gas per day (300MMscf/d).

This is where the challenge is, which could represent a major investment opportunity in Ghana, depending on how the government plays it. The country receives roughly 50MMscf/d as import from the West African Pipeline and another 70MMscf/d from the Jubilee field (with the latter expected to increase to 130MMscf/d by the end of 2015). In the event, the 120MMscf/d of gas currently available is at least 60% short of the 311MMscf/d required to fuel the nine operating thermal plants which have the “dependable” capacity to deliver 1,245MW. With this shortfall, most of these power plants are currently fuelled by diesel or light oil which, in spite of the crash in crude oil prices, is still far more expensive than natural gas.

To fuel both the existing plants and those in the process of being installed, the country will require at least 411MMscf/d by 2017, even when all of the gas from the Jubilee field has been utilized.

Ghana has some gas in the ground, but it needs to construct infrastructure to process, transport and distribute the fuel. But that won’t be enough. The country needs to import more gas, if it were to adequately fuel all the power plants both existing and under development.
Two oil and gas field projects TEN and Sankofa Gye Nyamme, are scheduled to come on stream in 2016 and 2018 respectively. Each of them comes with both associated gas and non -associated gas, and can collectively contribute about 250MMscf/d at peak. So far, it’s quite fuzzy how these fluids are expected to reach the market.

From what we know, the Ghana Gas Company (GGC) intends to construct a second gas plant on the site of the Atuabo plant, which processes Jubilee gas, to handle gas from TEN, a field that is close to Jubilee. This train will have the capacity to process 150MMscf/d, but it is not being built at the moment so it’s not likely to be ready in time for use by any of the power plants under development.

Sankofa is located quite a distance from TEN and Jubilee so the unprocessed gas will have to be pumped through a line. GGC doesn’t plan to build a third train until 2020. The gas is owned by the state and Ghana’s law doesn’t permit any company other than GGC to process and transport gas. So where will all the power plants being developed get the gas to fuel them?

AS NIGERIA’S GAS EXPORT TO GHANA IS unlikely to increase dramatically above the current 50MMscf/d, there are discussions going on about a number of LNG import projects. The government itself has proposed a Liquefied Natural Gas (LNG) regasification unit which would effectively function as an onshore LNG storage, regasification and delivery terminal and produce an estimated 450 MMcf/d of natural gas from 2016. Besides, General Electric (GE), the American energy contractor, is involved in a consortium including oil and gas operator Endeavor Energy, electricity producer Eranove and Sage Petroleum that has entered into a long-term supply agreement for Liquefied Natural Gas (LNG) for the Ghana 1000 project, an integrated gas-to-power project that will consist of 1,300 MW to be delivered in two phases, a floating storage and regasification unit (FSRU) and related infrastructure necessary to import LNG. There are no details about the timeline of this project and the gas the partners plan to import appears just for them.

In essence, electricity shortage in Ghana has thrown up opportunities that can be met by companies taking risks; there’s a shortage of gas for power plants that need to be met, even if negotiations with government on route, tariff and volume will difficult road to travel; there’s ample space for Independent Power Plants and wide amplitude for transmission infrastructure. The Ghanaian power landscape is wide open for business.This piece was initially published in the April/May 2015 edition of the Africa Oil+Gas Report